A COVENANT SNAGS CONVERSION

By Dorothy J. Gaiter

Published: August 7, 1983

An all-but-forgotten covenant setting restrictions on housing built under New York City's postwar slum-clearance program has thrown three Manhattan apartment buildings in various stages of conversion into uncertainty.

Although the wording varies slightly in each document, the deeds to all three contain language that suggests that any changes in the developments for 40 years after completion must first be approved by the City Planning Commission and the Board of Estimate. The buildings were completed in the late 1950's and early 1960's.

The immediate effect has been on conversions to condominiums or cooperatives under way or planned at three Manhattan developments - Kips Bay Towers, Park West Village and Coliseum Park Apartments. Depending on which lawyers are asked for an opinion, such conversions do or do not require city approval.

At Kips Bay Towers, apartments have been selling as condominiums for about two years, although the city agencies were never asked to sanction the conversion.

A few weeks ago, the office of State Attorney General Robert Abrams, which cleared the Kips Bay plan, announced that it would refuse to clear plans for the other two properties until the Planning Commision and the Board of Estimate approved the sales or waive their right to approve them. Without this, the Attorney General's office says, conversions would be a violation of the development contract with the city.

Last week, however, the City Corporation Counsel said in court papers that the city could not compel sponsors to bring forward their sale plans to city agencies in the absence of a positive decision by the Board of Estimate to intervene.

That has not ended the matter. The Attorney General's office said last week that it would continue to refuse to let sales in such projects begin, and that the Board of Estimate would take up the issue.

Kips Bay occupies a site between First and Second Avenues and 30th and 33d Streets. About 70 percent of the 1,120 apartments there have already been sold, and many buyers fear they do not have clear title and will have trouble reselling.

The housing developments involved were built under Title I of the Federal Housing Act of 1949, which was enacted to encourage construction of residential devlopments. Under Title I, the city could acquire a blighted area, clear it and sell it to private developers at a discounted price. The Federal Government bore two-thirds of the amount of the discount and the city the balance, making the housing more affordable to the public. Some developments were built as cooperatives and others as rentals. Although Andrew J. Stein, the Manhattan Borough President, asked Mr. Abrams to halt sales at Kips Bay, sales and resales have continued and title insurers are continuing to insure title, said Louis Siegel, a lawyer and vice president of Lee National Corporation.

In addition, several amendments to the Park West and Kips Bay redevelopment plans may supersede what some lawyers said was the original plans' intentions to provide rental housing.

The state became aware of the covenant's possible application to Kips Bay in June, although the plans were filed with the state several years ago. The Kips Bay conversion, with a total selling price of $135 million to outsiders and $81 million to insiders, is one of the largest in the city. ''No one will want to reverse the transfer,'' said Oliver A. Rosengart, the assistant attorney general who handles Title I cases. ''It would harm purchasers, who are innocent people.''

Since June the state has refused to review the condominium conversion plans for two Park West Village buildings, at 372 and 382 Central Park West. The filing for 800 units was submitted by Park West Village Associates, of which Harry B. Helmsley is the principal. The cooperative-coversion plan for the 575-unit Coliseum Park Apartments, 345 West 58th Street and 30 West 60th Street, has been accepted for filing before the covenant issue was raised. Accepted for filing means that sales can begin; the plan is declared effective when there are enough sales for a closing.

However, sales at Coliseum Park were halted last month, Mr. Rosengart said, and those people who had entered contracts to buy were told they could withdraw. The sponsors of Park Village and Coliseum Park have sued the city and the Attorney General's office to have the conversion plans accepted for filing.

The Park West and Kips Bay conversions are noneviction plans, meaning that renters may stay on and be offered renewal leases. Apartments can be occupied by purchasers only as vacancies occur. The proposed conversion at Coliseum Park is an eviction plan, under which nonpurchasers must move within three years after the conversion.

''The city and the public spent a lot of money and that expenditure has to be protected in some way from undue profiteering,'' said Bobby Minter, a spokesman for Mr. Stein. The purpose of the covenant was to protect the public's interest in ''situations of just this kind,'' he said.